American Leadership at Risk – And How to Win It Back

Book Review Building the New American Economy: Smart, Fair, and Sustainable by Jeffrey D. Sachs (Author), Bernie Sanders (Foreword) Columbia University Press, February 7, 2017

Sachs New Economy

When Professor Sachs, one of the world’s most influential economists, wrote the book I’m reviewing here, we lived in a simpler, more innocent world, full of hope for a better future, particularly after the success of the 2015 Paris Climate Agreement, in large part a result of President Obama’s efforts.

America was firmly seated in the global leadership role it had occupied since World War II and as recently as last summer, it looked like nothing could upend it. The most recent “soft power” wins included the opening with Cuba and the deal with Iran to neuter its nuclear power – soft power wins that came on top of a long series of similar victories since 1945, starting with the generous Marshall Plan that resuscitated Europe from the ashes of war.

It may come as a surprise to many Americans, but it is this soft power, much more than its military power, that has ensured American leadership, turning it into a global moral compass, effectively the “land of dreams”.

Incidentally, the American military is well aware of this soft power, as evidenced in a recent letter signed by over 120 retired generals and admirals calling on Congress not to slash funds for diplomacy and foreign aid (as called for in Trump’s proposed budget), noting that “The State Department, USAID, Millennium Challenge Corporation, Peace Corps and other development agencies are critical to preventing conflict and reducing the need to put our men and women in uniform in harm’s way.”

Sachs’ book, Building the New American Economy: Smart, Fair, and Sustainable, was intended as a roadmap for America to continue to lead the world. He had worked on Bernie Sanders’ campaign in 2016 and clearly meant this book to guide a new Sanders administration – for Professor Sachs, as he insisted in a recent interview discussing his book, sees himself as a “progressive”. And barring Sanders, no doubt he expected to see Clinton in the White House.

But that was not to be. Some sixty million Americans, many without a college degree and who felt by-passed by “globalization” and betrayed by a “blinkered elite”, voted in a man that is likely to upend America’s global leadership by systematically cutting everything that sustained America’s soft power: foreign aid and diplomacy; the environment and clean energy; support to science, health and the arts;  immigrants and trade.

As soon as Trump signed his “Energy Independence” executive order on March 28 rolling back Obama’s Clean Energy Plan, China stepped forward, claiming the climate leadership role. And this came on top of the Davos meeting earlier this year, where, as Sachs put it, “Chinese President Xi Jinping offered a stirring defense of globalization and international responsibility.” Indeed, Chinese leadership is the biggest story that came out of Davos this year.

Is there anything that can be done to win back the moral high ground and global leadership for America? Professor Sachs’ book shows us how.

Why We Should Listen to Professor Sachs

Jeffrey D. Sachs, born in 1954 and raised in a suburb of Detroit, Michigan, is today Professor of Sustainable Development and Professor of Health Policy and Management at Columbia University as well as Director of Columbia’s Center for Sustainable Development and of the UN Sustainable Development Solutions Network (SDSN). Sachs started early accumulating firsts. He was one of the youngest ever to achieve tenure at Harvard University, becoming a full professor of economics in 1983 when he was just 28.

Over the next two decades, he was one of the few economists willing to leave the safety of Academia’s white tower and step out in the real world, with the risk of getting burned.

Sachs_at_UN 2009

In this photo: Jeffrey Sachs at the UN (2009) –  Photo Credit: Javaman200

And burned he was.  But at first, he met nothing but success. He managed to break Bolivia’s 14,000 percent inflation in 1984 and quickly matched this success in Brazil and Ecuador. Next, he devised a mechanism to wake up slumbering post-communist economies: Known as “shock therapy”, a combination of price liberalization, budget stabilization and a slashing of subsidies, it made his reputation in Poland and more generally in Eastern Europe and Russia as an “economic liberator”.

In the end, shock therapy did not work as intended, through no fault of his (Western governments and the IMF did not follow through) and Sachs resigned as Russia’s economic advisor, his reputation intact.

By 1995, he was Director of the Harvard Institute for International Development and five years later, he moved to New York to head Columbia University’s Earth Institute. In that function, he led a university-wide organization of more than 850 professionals from natural-science and social-science disciplines, in support of sustainable development.

2000-2015: The Onset of the “Age of Sustainability”

Since the United Nations adopted the Millennium Development Goals (MDGs) in 2000, Professor Sachs has become the leading scholar and practitioner of sustainable development and worked closely with UN Secretary General Kofi Annan first, and Ban Ki-Moon next. He started out with a bang, chairing the WHO Commission on Macroeconomics and Health which helped fund health care and disease control in low-income countries; he worked to launch the Global Fund to Fight AIDS, TB, and Malaria that has been enormously successful, with 20 million lives saved so far. Working with the Bush administration, he helped develop the highly effective PEPFAR program to fight HIV/AIDS, and the PMI to fight malaria.

That first decade was filled with milestones: in 2005, his book The End of Poverty: Economic Possibilities for Our Time, in which he drew up a strategy to eradicate poverty in 20 years became a New York Times bestseller; that was shortly followed by two other equally successful books, Common Wealth: Economics for a Crowded Planet (2008) and The Price of Civilization: Reawakening American Virtue and Prosperity (2011).  From 2002-2006, he chaired the UN Millennium Project that developed an action plan to implement the MDGs, adopted by the UN in 2005.

This led, inter alia, to his directing the Millennium Villages Project that aimed to demonstrate the soundness of a revamped model of integrated rural development (IRD) in a dozen African countries, reaching out to 500,000 people. Started in 2004 in Kenya, it gained the support of an array of global leaders – investor George Soros, fashion designer Tommy Hilfiger, U2’s Bono – and exposure in the media, including a documentary film with Angelina Jolie aired on MTV.

By 2013, the project had an annual budget of $25 million. But it was also running into some problems: there were  accusations (reported by the Economist among others) that the project was not set up with a proper system to monitor results, in particular it lacked “control villages” to assess impact.

A final evaluation to gauge its effectiveness was launched in 2015,  however, as I write, findings are apparently not yet available. Speaking from my own extensive experience in project evaluation (20 years), I feel that, in all fairness to Professor Sachs, the controversy arising from the supposed omission of “control villages” is largely baseless. It has never been standard practice to use “control villages” in evaluating IRD projects, and in FAO where I worked, we had a long experience with IRD projects, including a very large one in southern Niger in the 1980s funded by the Italian government to the tune of $70 million over a decade.

Ideally, an IRD monitoring system to track progress should be built on collecting “baseline data” in a “pre-project situation”. I say “ideally”, because, donors often refuse to finance the necessary collection of baseline data, skimping on it and preferring to spend money on project activities to “move the project forward as fast as possible”, which they see as more important than “gathering numbers”. As to the idea of “control villages”, while theoretically possible, they are in fact difficult to identify due to hard-to-control ripple effects from other aid initiatives or business investments that inevitably change conditions on the ground throughout the economy.

In any case, whether an evaluation can prove success or not – one thing is incontrovertible: Professor Sachs has put poverty and sustainable development squarely on the map. Since 2012, he is the Director of the UN Sustainable Development Solutions Network (SDSN) that seeks to develop solutions to achieve sustainable development, that range from offering training opportunities to working out pathways to zero carbon emission and financing for sustainable development. And in 2015, he published his book on sustainable development, The Age of Sustainable Development   that is fast becoming the go-to manual for “global citizens” to address extreme poverty, environmental degradation and political-economic injustice.

2016: The Turning Point, Focusing on America

As the US Presidential election picked up speed, Sachs shifted his focus away from the “global citizen” to the American citizen. During the campaign, he served as an adviser to Bernie Sanders who eventually wrote the foreword to his book.

Over that fateful campaign year, he wrote several noteworthy op-eds in the Boston Globe articulating his ideas regarding what was wrong with America. The first article, aptly titled Economic choices facing the United States: Why we need a new direction, laid out the foundation of what was to become his book Building the New American Economy. It sounded a positive note:

“My contention is that with the right choices — far better choices than we’ve been making recently — America’s economic future is bright. Indeed, we are the lucky beneficiaries of a revolution in technologies that can raise prosperity, slash poverty, increase leisure time, extend healthy lives, and protect the environment. Sounds good, perhaps too good to be true; but it is true. The pervasive pessimism — that American children today will grow up to worse living standards than their parents — is a real possibility, but not an inevitability.”

So what are the “right choices”? Sachs, with his long experience of sustainable development, has no doubts:

“My starting point is a concept — sustainable development — that conveys a new and better approach to national problem solving. Luckily, it’s a concept that’s been around for a while, long enough to build an extensive body of knowledge and extensive evidence of what to do. And long enough to be acknowledged widely not only by scientists, engineers, and a growing number of investors, but also by governments around the world. Last September, all 193 governments of the United Nations adopted sustainable development, and 17 specific Sustainable Development Goals (SDGs) as the basis for global cooperation on economic and social development during the coming 15 years. Last December, the same governments adopted the Paris climate agreement, also built on the concept of sustainable development.”

While Trump is at the helm, it is unlikely that he, or anyone in his administration, will pay heed to what is in the book.

But there is little question that it can help gather the opposition around a set of actionable ideas.

What is in the Book

The fact that it is surprisingly short, barely more than a brief (152 pages), works to its advantage. No economic jargon, nothing technical in it, only plain common sense.

In the preface, Sachs held out an olive branch to Trump: He argued that “Trump’s pledge to make America’s infrastructure ‘second to none’ is a correct and bold goal” and “a builder-president could indeed help restore vitality to the U.S. economy and put millions to work in the process.”

He then proceeds to interpret for Trump’s benefit (should he ever read it) the three concepts that are at the core of the book, “smart, fair and sustainable”:

  • Smart means “deploying the best of cutting edge technology”;
  • Fair “would start with Trump’s pledge to rebuild the inner cities” (with attention to transport, health, safe drinking water etc.);
  • Sustainable means “acknowledging and anticipating the direct threats facing America’s cities and infrastructure”, recalling the “vulnerability of New Orleans levees”, the recent flooding of New York City.

Though he wrote this preface well before Trump entered the White House (17 November), Sachs is not naïve. He warns that: “much could go wrong in an undirected building boom […] pledges to restore the Keystone XL Pipeline and US coal production are cases in point”, they would be an “expensive dead end.” He feels “it’s funny that climate deniers are chortling about the incoming Trump administration. Nature doesn’t care what they think, and neither do the 192 other countries on the planet that signed the recent Paris Climate Agreement.”

Prosperity, he argues, is to be found in sustainability: “The United States should enthusiastically embrace the Sustainable Development Goals as if our future depends on them. It does.” The SDGs “are our best compass back to a decent society”; they can “become the guideposts and a rallying cry for a generation looking to heal wounds, avert climate disaster and promote the common good.”

Sachs is clearly calling out to the younger generations: Sustainable development implies “a society very different from the one we have today, when elites run the show and the rest of us are compelled to scramble to make do the best we can.” The SDGs are a “unique opportunity”, a little like the goal-setting President John F. Kennedy engaged in when he planned the moon shot in the 1960s: They “point to the mountain summit” and we need to “decide how we are going to get there”.

What does this mountain summit look like? In Chapter 14, we find an interesting table that shows the “summit” is an adaptation to American needs of the 17 SDGs to be achieved by 2030.  Here are the key ones (in Sachs’ own words where possible; the SDG goal is summarized in parenthesis):

  • SDG 1 (end poverty): America should pledge measures to reduce the poverty rate from 17 percent, the highest poverty rate of any advanced economy, to 8.5 percent (or below);
  • SDG 2 (improve nutrition): America should pledge public health actions to reduce the obesity rate from 36 percent, the highest of any advanced economy, to below 10 percent;
  • SDG 3 (healthy lives): The United States, with a current life expectancy lagging behind the world’s leading nations by at least four years, should pledge to raise life expectancy to at least 85 years;
  • SDG 4 (inclusive quality education): America should pledge to cut student debt from the current $1.2 trillion (recalling that “many other countries with comparable university enrollment rates, have no student debt”) to below $200 billion while raising college completion rates from 33 percent to at least 50 percent of 25- to 29-year-olds;
  • SDG 10 (reduce inequality): The United States should pledge to undertake a range of policies, including taxes and transfers, health care, education and corporate reforms, to narrow income inequalities (recalling it is the most unequal of all the high-income OECD countries), aiming for a decline in the Gini coefficient on disposable income from the current rate of 0.41 to 0.30 or below;
  • SDG 7 (affordable and clean energy) and SDG 13 (climate action): The United States, by shifting rapidly to low-carbon energy, should pledge to cut annual CO2 per capita emissions from sixteen tons (three times the world average) to below eight tons, and reach net zero emissions in the second half of the century, as per the Paris climate agreement;
  • SDG 16 (justice for all, strong institutions): America should aim to reduce the prison population from the current level of 716 inmates per 100,000 people (the highest rate of any advanced economy) to no more than 100, through an urgent reform of its penal code and help young minority men gain skills and jobs for productive lives;
  • SDG 17 (means of implementation and partnerships for Global Goals): The United States should increase its development aid, currently at 0.17 percent of GDP (lowest share of development assistance among high-income countries and far from the agreed global target of 0.70 percent) by shifting about 10 percent of current military-related outlays.

Now with all the cuts in Trump’s proposed budget and the $52 billion for the military, we know that none of this will come to pass in the next four years. In fact, the recent missile strike on Assad’s Syria shows how far the Pentagon has reached into the White House. But if you’re wondering why the “mountain summit” (the goals for America) are those and not others, and what needs to be done to reach them (the policy measures), you need to read the book. The analysis is brilliant and very convincing (I was convinced).

Perhaps what is most striking about this book is that it marks a radical departure from the “Washington Consensus”, the standard reform package of the 1980s. Based on a market approach to economic growth, it has governed American thinking about economics and politics over the last three decades (and the way international aid has been given).

This is a book that calls for a new way of thinking about the economy and it starts with accepting that resources on this planet are finite and that our plundering has exacerbated climate change. It calls on us to leave aside fruitless discussions as to whether global warming is human-caused or not, and simply acknowledge that global warming is here with us, that it is a real threat to mankind’s survival and that we need to do something fast to reverse it.

What is required to do this is totally novel: Sachs argues for more “long-term thinking and strategic plans of action”, in short, some form of public planning. This, in an American context, is ground-breaking. It calls for more and bigger government, anathema to the Republicans, yet Sachs won’t give up, he urges the new administration to govern using American “world-class expertise in its universities, businesses, think tanks and foundations” – recalling that there are 4,000 colleges and universities across America.  “Long-term strategies should be the result of a nationwide deliberation to engage top thinkers and doers throughout the country”.

And just to drive the point home, he notes: “in a country with the wealth of knowledge, technology, and skills of the United States, we don’t need to settle for a rank of twenty-second out of thirty-four OECD countries in sustainable development.”

Certainly not. But given America’s diffidence of Big Government and distrust of the “thinking elite”, can the country pull itself together and implement an SDG agenda? I believe it can. It is a fact that America has an unparalleled reservoir of skills and talents. We may all have to wait for Trump to depart, but Sachs has shown a clear path forward and once Trump is gone, the climb back to world leadership becomes entirely possible. And it should be pursued.

This is the “land of dreams”, isn’t it?



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